US Reduces Share of Chinese Goods in Asian Imports
From 70% in 2013 to 50.7% in 2022
Rising Labor Costs and US-China Tensions Combined
It is forecasted that the proportion of Chinese-made products among those imported by the United States from Asia will fall below half for the first time in over a decade this year. This is analyzed as the result of Western companies accelerating the 'China Exodus' due to rising labor costs in China combined with geopolitical tensions such as the US-China conflict.
According to the 'Kearney Reshoring Index' created by the US consulting firm Kearney based on US trade data on the 4th (local time), the share of Chinese-made products among those imported by the US from Asia, excluding South Korea and Japan, was 50.7% last year. This represents a drop of about 20 percentage points from 70% in 2013. Kearney expects this share to fall below 50% this year.
As imports of Chinese-made products, once called the 'world's factory,' decreased, Vietnam benefited from the spillover effect. The US dependence on imports from Vietnam has doubled over the past five years and tripled over the past ten years. Dependence on imports from India, Taiwan, and Malaysia has also increased.
The global manufacturing industry's move away from China has led to a decrease in Chinese imports. Many companies relocated their production bases from China to other Southeast Asian countries such as Vietnam due to tariff increases under the protectionist policies of the Trump administration and rising labor costs in China. Subsequently, the Biden administration also pressured China comprehensively over advanced semiconductors, the Taiwan issue, and more, further accelerating companies' moves away from China. In particular, laws such as the CHIPS and Science Act (CSA) and the Inflation Reduction Act (IRA) pressured global companies to invest within the United States.
Patrick van den Bosch, an analyst at Kearney, said, "With new US laws related to semiconductors and electric vehicle batteries, more investors will leave China and relocate to the US and Mexico," adding, "By the end of this year, the share of China in US imports from Asia is expected to definitely fall below 50%."
Global investment bank Morgan Stanley also released a report in March stating that China's role as a global production base is weakening due to US-China decoupling. Morgan Stanley analyzed, "Rising labor costs in China, geopolitical tensions, and human rights issues have made companies less dependent on Beijing, the world's factory," and "With the separation of the two economies, major manufacturing is returning to the home country (the US), and import sources are shifting from China to ASEAN countries, India, Mexico, and others."
Due to inflation and rising costs hitting the global economy, some companies are considering relocating production bases beyond Southeast Asia to other regions such as Africa. According to Deutsche Bank, 95% of the 719 products that the US depends on China for can be substituted from other regions within Asia.
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